ANNUAL REPORT 2004 - Skanska

Baltzar City is a modern building designed to harmonize with
an old cityscape. This office property with retail space in the
heart of Malmö, Sweden won the 2003 Malmö City Planning
Award. The building, totaling about 11,200 sq. m (120,000
sq. ft.), was sold to German investors in 2004.
Skanska’s Sundbypark development in Sundbyberg, near
Stockholm, attracts both tenants and investors. The two
first phases, consisting of offices and laboratories totaling
some 30,500 sq. m (328,000 sq. ft.), were completed in 2003
and the first quarter of 2004. The properties, which are fully
leased to Ericsson and ITT Flygt, were divested during 2004.
The East-West Business Center in Budapest, was sold to an
Irish fund in 2004. Located in central Budapest, the East-West
Business Center was the first in a long series of office projects
that Skanska has developed in central European capitals. Its
high standard has attracted international tenants.
Business units
Skanska Project Development Sweden
SEK M 2004 2003
Net sales 4,174 7,922
Operating income 1,274 2,814
Capital employed 6,421 7,434
Return on capital employed, % 17.3 28.2
Operations focus on initiating, developing,
leasing and divesting commercial real
estate projects, with a focus on office space,
shopping centers and logistics properties in
Stockholm, Gothenburg and the Öresund
region.
The business unit sold 26 properties in
21 transactions during 2004. Of these, six
were project properties with a total area of
73,000 sq. m (786,000 sq. ft.), of which 98
percent was leased. Total divestment volume
during the year was SEK 3.4 billion, with a
capital gain of SEK 1.0 billion. Among the
year’s transaction, special mention can be
made of the Sundbypark I and II properties
in Sundbyberg together with Ceres II in
Gothenburg. The buyer was AMF Pension
and the capital gain amounted to more than
SEK 250 M. Baltzar City in central Malmö
was sold during the summer to a German
fund manager with a capital gain of SEK 54 M.
In conjunction with the project start-up of
Bryggen 47 in Copenhagen, the property was
sold to the tenant. International investors
remain interested in the Swedish market,
but their share of divestment volume fell
from about 90 percent to about 40 percent as
Swedish investors expanded their share.
The downward trend, with rising vacancies,
has ceased. The rental market is believed
to have bottomed out during 2004.
Rental market demand is expected to
increase during 2005. Extensive vacancies,
especially in older properties, will nevertheless
hamper rent levels. The largest demand
is for modern office space in good locations.
In the investor market, interest from
international investors is expected to remain
stable. The increased interest from Swedish
investors is also expected to continue.
The greatest interest is in newly constructed
properties. The supply of these is relatively
limited, however, which will contribute to
broader demand.
Skanska Project Development Europe
SEK M 2004 2003
Net sales 1,410 939
Operating income 363 247
Capital employed 1,209 2,025
Return on capital employed, % 22.5 10.8
Operations focus on initiating, developing,
leasing and divesting commercial real estate
projects, especially office and retail space.
The emphasis is on three growth markets:
Budapest, Prague and Warsaw.
The office leasing market was stable in
Budapest and Prague during 2004. The office
market in Warsaw remained weak in 2004.
The investment market in all three cities
remained strong, with heavy interest mainly
from institutional investors in acquiring
completed properties with good occupancy
levels.
During 2004, four properties were divested
for a total of SEK 1.3 billion, with a gain
of SEK 0.4 billion. The largest single transaction
was the divestments of the Science
Park project property in Budapest, with a
capital gain of SEK 274 M. The buyer of the
property was the German fund management
20 Commercial Project Development business stream – Skanska Annual Report 2004